Why Minority Women Now Control Nearly Half of All Women-Run Businesses

What's behind the increasing growth in businesses owned by women of color.

Last year, her friend Trishona Helm was visiting L.A. from their native Omaha and snapped Caldwell a picture of rolled ice cream--which is rolls of ice cream placed vertically in a cup, finished off with various sweet toppings.

Helm's response: "Let's bring it to town. No, I'm serious."

In August, they invested $10,000 of their savings and a $30,000 loan into launching Mixins Rolled Ice Cream in downtown Omaha. By the end of October, the business had generated $100,000 in sales--and Caldwell is already planning to create a rooftop ice cream bar at Mixins next summer as well as mulling franchising the business.

Caldwell has a lot of company: Nearly 63 percent of women financed their businesses from their own savings, according to the 2018 State of Women and Entrepreneurship survey of 279 women. Compare that to versus 43 percent of surveyed Inc. 5000 CEOs.

Caldwell, a 25-year-old biracial single mother with three kids, previously worked at a news station and childcare learning center. She sees her business as a means to provide a better life for her kids, even as it forces her to juggle competing demands. One vivid memory for Caldwell is signing the loan before going straight into labor the next day.

Her parents would help take care of the kids. But that meant she couldn't see her children for more than a few days at a time--and would often turn to her business partner for a shoulder to cry on. In this, too, Caldwell isn't alone. Spending time away from family is one of the biggest sacrifices female founders cited in our survey. (63 percent of our survey respondents have children.)

"I'm just trying to make a sacrifice now," she says. "I'm trying to make a better life for them in the future."

The face of female entrepreneurship is becoming a lot less white. Minority women control 44 percent of women-owned businesses in the United States, up from 20 percent in 1997, according to Census data and projections by research firm Womenable--even though "there's this notion that we don't exist," says Esosa Ighodaro, founder of the social media shopping app CoSign and the networking organization Black Women Talk Tech. "Entrepreneurship is very lonely, and even lonelier in minority communities."

Even so, minority women are starting up businesses at much a faster rate than their white counterparts. While the number of white women-owned businesses grew 40 percent from 1997 to 2016, those owned by black and Hispanic women showed much higher growth rates at 518 percent and 452 percent, respectively, according to the analyzed data.

Researchers attribute this burst of entrepreneurial activity to both educational progress and economic necessity. “Women have been taking control, frankly, for centuries,” says Kathy McShane of the U.S. Small Business Administration’s Office of Women’s Business Ownership. “But now we’re talking about it.”

But one of the biggest hurdles women--particularly, minority women--continue to face is "access to capital," says Margot Dorfman, CEO of the U.S. Women's Chamber of Commerce. Part of it has to do with the industry in which women are founding businesses. According to a 2016 report from U.S. Women's Chamber of Commerce, the majority of women-owned businesses are in the service industry. (Data shows most funding goes toward software and biotechnology.)

Men still get the vast majority of venture capital--only 2 percplaceholderent of all VC funding goes to U.S.-based female-only founder teams, according to PitchBook. But an uptick in female-focused funds is "encouraging women of color to enter the field," says Miriam Rivera, co-founder of Palo Alto, California-based Ulu Ventures. She says that more women-led VCfirms have become more public about their portfolios having larger percentages of women CEOs. According to our survey, 38 percent of the women who raised money sought out female investors; they cited female investors' better understanding their target market as a key reason.

Another factor spurring entrepreneurship among this cohort in recent years: more resources, ranging from podcasts and Facebook groups to meet-ups. Last year, Ighodaro launched Black Women Talk Tech--which has more than 500 members and holds national events to help black women build successful businesses. Ighodaro started the group, she says, because she couldn't find groups that would "support her lens": They were mainly run by white women. "Sometimes, I'm invited because I'm the black card," she says. "It just becomes a talking exercise."

Others are taking inspiration from today's political climate. Investor and entrepreneur Georgie Benardete launched Align17, a marketplace to facilitate direct investing related to social and environmental opportunities, last year--partly, she says, in response to the Trump administration's position on immigration. (Fifty-one percent of respondents in our survey said they have become more politically active since the 2016 elections.)

Benardete's family fled a dictatorship in Argentina and became refugees--first in Chile, and then in Puerto Rico, before settling in the U.S. in 1976. "I never thought we would be in a situation where American citizens go to renew their passports and get denied," she says. "I recognize this as an option to engage."

Also according to our survey, 62 percent of women worked at a corporation before starting their own business. Many of those who quit to start their own business were just tired of their jobs.

Junea Rocha worked as a product manager at a construction firm, where she found the male-dominated environment both "exhausting and inflexible." So, in 2010, she co-founded Portland, Oregon-based Brazi Bites, a 2018 Inc. 500 honoree that manufactures Brazilian cheese bread snacks, to control her "own destiny." As a woman and an immigrant from Brazil, she has made it her mission to make her workplace more diverse. More than half of her eight-person staff are women.

As a minority, "you just grow up knowing you have to work for everything that you have," she says.